A new world order event presentation.pptx

Wifi
2QAG_Guest
Welcome_Guests July 10, 2025
@resfoundation
A new world order
The economic implications of global trade, tariffs,
and uncertainty
Professor Meredith Crowley, Professor of Economics at the
University of Cambridge
Sherman Robison, Senior fellow at the Peterson Institute
for International Economics
Russell Napier, Independent Investment Strategist, Orlock
Advisors
Chair: David Willetts, President of the Resolution
Foundation

2
@resfoundation
Index of services and goods export volumes (Q4 2018=100)
Notes: Range shows highest to lowest G7 country each quarter. Trade volumes are measured in national currency, chained volume measures, seasonally
adjusted. Source: RF analysis of OECD, Quarterly National Accounts data.
UK goods trade has tanked…but services are performing well

3
@resfoundation
Proportion of UK manufacturing value added ultimately imported by the US: 2019
UK exports of
pharmaceuticals
and cars very
dependent on
the US
Source: RF analysis of OECD TiVA.
Trump deal key given reliance on US demand for goods

4
@resfoundation
Relative frequency of total jobs appearing in each vingtile of the wage distribution: UK
Those good jobs
in the tradable
goods sector
also tend to be
outside London
and SE
Notes: Industries are separated into goods and services according to the standard ONS classification, and into tradable and non-tradable according to the categorisation in B
Broadbent et al., The Brexit Vote, Productivity Growth and Macroeconomic Adjustments in the United Kingdom, mimeo., 2020. Wage vingtiles are calculated using gross
weekly wages in the LFS. Workers in the three types of industry are assigned to and counted in each vingtile. The counts are divided by 5 per cent of the total number of
workers in the corresponding type. Source: Analysis of ONS, Subnational Trade in Services data tables and Regional Trade in Goods Statistics dis-aggregated by smaller
Jobs in the tradable goods sector tend to be higher paying

Wifi
2QAG_Guest
@resfoundation
A new world order
and uncertainty
Meredith Crowley, Professor of Economics at
the University of Cambridge

A new world order:
the economic implications of global trade, tariffs, and uncertainty
Meredith A. Crowley
University of Cambridge and
CEPR
The Resolution Foundation
9 July 2025

The World Trading System
The modern World Trading System is an overlapping network of international trade
agreements that establish rules for trade in goods under the umbrella of the World Trade
Organization (WTO).
A foundational principle of the WTO system is reciprocal, mutually beneficial reductions
of tariffs – taxes on trade.
Beginning in 1947, multiple rounds of trade negotiations over 7 decades expanded the
system from 23 countries to around 165 and reduced policy barriers to trade fall
dramatically.

Global trade grew exponentially after World War II...
But as a share of global
GDP, its growth began to
slow around 2008-2009.
The red line is the start
of the US-China Trade
War.
Recent data suggests that
global trade as a share of
global GDP is settling
around 25 - 30%.
Source: https://www.wto.org/english/blogs_e/data_blog_e/blog_dta_24apr24_e.htm

The World Trading System embodies commitments to liberal trade...
Applied and Bound Import Tariffs, 2013
Source: Bown and Crowley
(2016)

...alongside contingency rules that permit temporary tariff increases
Percent of HS06 products subject to a temporary trade barrier, 1990-2013
Punchline: Trade policy by the US and EU (including the UK) consisted of open markets
for almost all goods alongside import tariffs and restrictions for a small fraction of goods.
Source: Bown and Crowley (2016)

What went wrong?
China’s Entry into the WTO in 2001 transformed the World Trading System
Between 2001 and 2021, China’s
trade grew 810% compared to
only 180% for overall global
trade.
WTO membership caused:
▶ ⇒ one-third of growth of
Chinese export value to the
US over 2000-2005
(Handley and Limao, 2017)
▶ ⇒ entry in the US of 40%
of new exporters from
China over 2000-2009
(Crowley, Meng, and Song,
2018)
200
400
600
800
1000
0
Value
in
Billion
US
Dollars
2000 2005 2010 2015
Year
Private Enterprises
Foreign Invested Enterprises
Other Enterprises
State-owned Enterprises
Source: Corsetti, Crowley, Han, and Song (2024)

Concerns with the consequences and structure of globalisation

In the US, China is blamed for the loss of manufacturing jobs
Chinese imports explain 55%
of the decline in US
manufacturing employment
2000-2007.
Source: Autor, Dorn and Hanson
(2013)

In Europe, anxiety over dependence on China in strategic industries
Consider solar panels:
▶ In 2011, Chinese exporters
captured 80% of the EU
market for solar panel
modules.
▶ The EU restricted imports from
China from 2012-2018.
▶ Solar panel imports rose when
restrictions were removed.
▶ In 2022, 87% of German solar
panel imports came from
China.

In China, the rise of foreign value added in China’s Exports...
...was a factor in Five Year Plans to support inward technology transfer and industrial
development (which have been criticised by trading partners as infringements on foreign-
owned intellectual property).
Source: Author’s calculations from OECD Trade in Value Added (TiVA) Dataset 2021ed

Where are we now?
American cooperation at the WTO faltered because of
▶ disatisfaction with the dispute settlement system,
▶ the ineffectiveness of WTO tools to support
domestic policy objectives, and
▶ the ineffectiveness of WTO tools to reign-in Chinese
State Capitalism.
American trade policy since Obama (2009-2017) has been shifting away from the
multilateral system, with the first major break coming in 2018 with the US-China trade war.
Over the next month, we will learn how broadly and severely the trade war expands to
other countries.

Wifi
2QAG_Guest
@resfoundation
A new world order
and uncertainty
Sherman Robinson, Peterson Institute for
International Economics (PIIE)

A New World Order:
Economic Implications of US
Withdrawal from the Global Trading
System
Sherman Robinson
Peterson Institute for International Economics (PIIE)
Karen Thierfelder
International Food Policy Research Institute (IFPRI)
July 2025
Panel discussion, 9 July 2025: A New World Order
Resolution Foundation, Royal Economics Society, and Society of
Professional Economists

Global Trade Evolution post WW 2:
Inter-Connected Regional Economies
(ICREs)
• ICRE
• Integrated regional economies with respect to world trade
• Members trade more within the ICRE than with non-ICRE countries
• Formal trade agreements follow trends in economic integration
evident in the trade data, usually decades before formal agreements
• Three ICREs evolved post WW2 and dominate the world
economy
• North America (US, Mexico, Canada)
• Europe (EU plus closely linked European countries)
• East and Southeast (E&SE) Asia (China plus East and Southeast Asian
countries)
19

Bilateral trade and GDP
Note:
1. Exports valued fob from row region to column region.
2. Bilateral trade as a percent of total trade.
3. Source: GTAP v11c, 2017. 20
US
Restof
NAFTA Europe China
Restof
E&SEAsia
Other
regions Total
Percent
ofglobal
GDP
US 0.0 2.8 2.5 1.0 1.9 2.2 10.4 24.6
RestofNAFTA 3.1 0.1 0.4 0.2 0.2 0.3 4.3 3.5
Europe 3.1 0.5 22.9 1.9 2.2 5.9 36.7 23.9
China 2.4 0.4 2.0 0.8 3.6 2.8 12.0 15.9
RestofESEAsia 2.2 0.3 2.1 4.8 5.6 2.5 17.5 14.6
Otherregions 2.4 0.3 5.4 2.4 2.8 5.8 19.2 17.4
Total 13.3 4.4 35.3 11.1 16.4 19.5 100.0 100.0

Bilateral trade net of intra-regional
trade
Note:
1. Exports valued fob from row region to column
region.
2. Bilateral trade as a percent of total trade.
3. Source: GTAP v11c, 2017.
21
US
Restof
NAFTA Europe China
Restof
E&SEAsia
Other
regions Total
US 0.0 0.0 4.5 1.7 3.4 3.9 13.5
RestofNAFTA 0.0 0.0 0.6 0.4 0.4 0.5 1.9
Europe 5.6 0.9 0.0 3.4 3.9 10.6 24.4
China 4.2 0.6 3.6 0.0 0.0 5.0 13.5
RestofESEAsia 3.9 0.6 3.7 0.0 0.0 4.4 12.6
Otherregions 4.3 0.5 9.7 4.3 5.0 10.3 34.2
Total 18.0 2.7 22.1 9.8 12.7 34.7 100.0

Bilateral exports
Note:
region.
2. Bilateral exports as a percent of total exports.
US
Restof
NAFTA Europe China
Restof
E&SEAsia
Other
regions Total
US 0.1 27.1 24.1 9.4 18.2 21.1 100.0
RestofNAFTA 73.5 1.9 8.4 4.8 4.9 6.6 100.0
Europe 8.6 1.4 62.6 5.2 6.0 16.2 100.0
China 19.7 3.0 17.0 6.4 30.3 23.6 100.0
RestofESEAsia 12.7 1.9 11.9 27.4 32.2 14.0 100.0
Otherregions 12.6 1.6 28.2 12.7 14.7 30.3 100.0
Total 13.3 4.4 35.3 11.1 16.4 19.5 100.0

Bilateral exports net of intra-regional
exports
Note:
region.
2. Bilateral exports as a percent of total exports.
US
Restof
NAFTA Europe China
Restof
E&SEAsia
Other
regions Total
US 33.1 12.8 25.0 29.0 100.0
RestofNAFTA 33.9 19.4 20.0 26.7 100.0
Europe 22.9 3.8 14.0 16.0 43.3 100.0
China 31.1 4.7 26.9 37.3 100.0
RestofESEAsia 31.3 4.6 29.4 34.7 100.0
Otherregions 12.6 1.6 28.2 12.7 14.7 30.3 100.0
Total 18.0 2.7 22.1 9.8 12.7 34.7 100.0

Recent US trade wars: Tariffs as
Foreign Policy
• US unilaterally raising tariffs: Trump 1&2, Biden, China trade war
• Safeguard tariffs (Section 201)
• Unfair trade practices (Section 301)
• National security (Section 232)
• Trump 2025 (all in violation of WTO rules)
• 10 % points + high “reciprocal tariffs” against many countries
• Various against EU and UK and others:
• Various against Canada and Mexico (violation of USMCA agreement)
• 60 % points (?) against China: continuing trade war
• Use of International Emergency Economic Powers Act (IEEPA) of 1977
• US tactics: trade agreements or extortion (nontrade issues)
24

Key findings from simulation analysis
• Developing countries should not join any trade war
• They gain from trade diversion and terms of trade changes
• Focus on deeper integration with Europe and E&SE Asia
• Mexico and Canada are damaged by US trade wars
• Consider diversifying away from the US , e.g. towards countries in
CPTPP
• Countries can diversify away from the US: feasible over time
• Trade with US declines, little or no change in global trade
• US share of global trade is much lower than Europe and E&SE Asia
• Relatively easy to divert much trade around US
25

Future Issues and Research Needs
• Withdrawal of the US from the global economy
• Reorienting trade and value chains
• Role of the WTO without active US participation or support
• Role of new regional trade agreements: CPTPP, RCEP, etc.
• Role of the EU: expanded trade and Euro as a potential reserve currency
• Global macro: exchange rates, capital flows, financial crises
• Migration and remittances
• US proposed mass deportations and closure of US to migrants
• Increased international migration: climate change, violence
• Increased uncertainty and volatility: challenges and responses
26

Wifi
2QAG_Guest
@resfoundation
A new world order
and uncertainty
Russell Napier, Title, Organisation

© Orlock Advisors
Trade Wars Are Capital
Wars
The Birth Of The New World Monetary Systems

© Orlock Advisors
The Old Order- 1994-2020
• The ‘Non-System’- Exchange rate management with only
limited controls on capital flows
• The consequences- the risk-free rate has been depressed
relative to the growth rate leading to more debt & higher asset
prices- particularly in the US where corporates adjusted
• The new system is born when China is forced to move to a
flexible exchange rate
Thursday 10 July 2025
Title of Presentation

© Orlock Advisors
Legacy: US Total Debt to GDP 1947-2024

© Orlock Advisors
Legacy: World Non-Financial Debt To-GDP
1Q 2022 4Q 2024
• Japan 425% 387%
• France 352% 323%
• UK 271% 225%
• China 268% 287%
• Italy 276% 230%
• USA 275% 249%
• Canada 362% 312%
• Germany 199% 199%
• India 175% 175%

© Orlock Advisors
China’s New Monetary Policy Changes
Everything
• The Trump administration seeks to restrict China’s surpluses
and ends the monetary policy that is mercantilism
• China must reflate given its escalating debt-to-GDP burden and
failure of the PBOC balance sheet expansion
• A flexible exchange rate devalues and leads to higher tariffs and
a need for a return to greater home bias by developed world
capital

© Orlock Advisors
China- The End of Exchange Rate
Management- Foreign Reserves 96-25

© Orlock Advisors
Consequences From China’s Float
• Deflationary initially but tariffs and higher broad money growth
in China mean inflation and higher developed world bond yields
• Even greater need to rebuild industrial capacity in the
developed world and need to mobilise capital- capital controls?
• A rapid move to financial repression to keep the risk-free rate
depressed relative to the growth rate- Butskellism

© Orlock Advisors
US Net Portfolio Assets To GDP (%)
2006 2009 2012 2015 2018 2021 2024
-60%
-55%
-50%
-45%
-40%
-35%
-30%
-25%
-20%
-15%

© Orlock Advisors
France Net Portfolio Assets to GDP (%)
2006 2009 2012 2015 2018 2021 2024
-50%
-40%
-30%
-20%
-10%
0%
10%

© Orlock Advisors
Conclusion: New Global Monetary Systems
• A managed exchange rate regime no longer works for China and
China’s export growth model does not work for the rest of the world
• A developed world system with capital repatriation, capital controls,
financial repression/ Butskellism- German bund issuance & Uk
‘mandation’
• China in a separate monetary system with limited trade flows and
capital flows between the two systems

© Orlock Advisors
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This research is for the use of named recipients only. If you are not the intended recipient, please notify us immediately;
please do not copy or disclose its contents to any person or body as this will be unlawful.
Information and opinions contained herein have been compiled or arrived at from sources believed to be reliable, but Orlock
Advisors Limited does not accept liability for any loss arising from the use hereof or make any representation as to its
accuracy or completeness. Any information to which no source has been attributed should be taken as an estimate by
Orlock Advisors Limited. This document is not to be relied upon as such or used in substitution for the exercise of
independent judgement.
© 2020 Orlock Advisors Limited
Postal Address: Newbattle House, Newbattle Road, Newbattle, EH22 3LH Scotland
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